Farm Progress

Both bears and bulls are looking towards the USDA report due out Wednesday.

Kevin Van Trump, Founder

September 10, 2018

3 Min Read
yelena yemchuk/ThinkstockPhotos

Soybean prices are slightly higher this morning. There's some talk of higher prices in China as a couple of their larger production areas are forecasting a possible weather hiccup. Bears here at home are talking about a drier U.S. forecast and continued talk that an already record USDA production estimate is growing even larger, pushing towards a 53 bushel yield average and +900 million in ending stocks. This is creating what seems to be more talk of the so called perfect bearish storm gaining even more momentum.

An all-time record Brazilian crop, being followed by an all-time record U.S. crop, happening at the same time the U.S. is trying to renegotiate trade with the worlds top buyer of soybeans has created the dark clouds. But perhaps intensifying the bearish storm is talk of extended trade complications with the Chinese, as well as an increase in total upcoming South American soybean acres. This has bears talking about the very real possibility of a +1.0 billion bushels U.S. ending stock number out on the horizon. If the early weather in South America looks to be cooperative and we do not see any real progress with the Chinese, the bears will probably try to apply more longer-term pressure to price.

There's some talk that with the funds short about 50,000 contracts, we could see some buying nearby in order to square positions ahead of Wednesday's USDA report. There's also some talk that we could see some buying if we get another bearish USDA report. Remember last month, following the massively bearish report in August, many inside the trade were surprised to see the market rally just a few days later. The USDA's updated estimates were released on August 10th, the market fell by -40 cents that afternoon. We fell by another -10 cents the following morning. Then over the next five or six trading sessions the market proceeded to gain it all back. The bulls however quickly ran out of momentum and prices once again took a deep tumble.

I just think without the weather creating more widespread complications, and without a resolution between Washington and Beijing, it's going to be tough to hold the nearby rallies. As producers, I suspect most of us are looking for ways to store unpriced new-crop bushels. The problem is, everyone making the same move always tends to worry me and rarely works out as all are anticipating.

The current board price is about -$1.20 less than last year, and most all areas are seeing a significantly weaker basis. I continue to hear more growers to the north trying to figure out how they are going to make $6.50 cash soybeans work? Bottom-line, I'm worried that prices could remain underwater longer than many of us are planning on holding our breath. If we happen to post some type of nearby rally of any significance, I think I will look to reduce a bit more new-crop risk. I just have a hard time believing all of us doing nothing and simply waiting is going to be the right answer. Let ' s hope I'm wrong...


The opinions of the author are not necessarily those of Corn+Soybean Digest or Farm Progress.



About the Author(s)

Kevin Van Trump


Kevin is a leading expert in Agricultural marketing and analysis, he also produces an award-winning and world-recognized daily industry Ag wire called "The Van Trump Report." With over 20 years of experience trading professionally at the CME, CBOT and KCBOT, Kevin is able to 'connect-the-dots' and simplify the complex moving parts associated with today's markets in a thought provoking yet easy to read format. With thousands of daily readers in over 40 countries, Kevin has become a sought after source for market direction, timing and macro views associated with the agricultural world. Kevin is a top featured guest on many farm radio programs and business news channels here in the United States. He also speaks internationally to hedge fund managers and industry leading agricultural executives about current market conditions and 'black swan' forecasting. Kevin is currently the acting Chairman of Farm Direction, an international organization assembled to bring the finest and most current agricultural thoughts and strategies directly to the world's top producers. The markets have dramatically changed and Kevin is trying to redefine how those in the agricultural world can better manage their risk and better understand the adversity that lies ahead. 

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